How to develop franchise in Asia in 2023?
TopFranchise gathered world-class franchise experts and discussed with them the spring and summer market trends, as well as strategies for achieving results when selling a franchises. One of the invited experts was Albert Kong, Founder and CEO of AsiaWide Franchise Consultants, an expert on franchising in Southeast Asia.
He analyzed the situation in Southeast Asia in mid-2021 and shared his opinion on this matter.
The broadcast was hosted by Vasil Gazizulin, founder of the international portal Topfranchise.соm.
– Albert – In Southeast Asia, there are 10 nations that are members of ASEAN (Association of Southeast Asian Nations). Different countries are at different stages of development. Some, like Singapore, have already reached the status of a developed nation, and some are still moving towards this goal. Many economists believe that Southeast Asia will be the next region to grow rapidly despite the pandemic, thanks to a population, especially young people, which seeks for a better quality of life and variety of choices in food, fashion or other types of goods.
In most of the countries of Southeast Asia, apart from Malaysia and Vietnam, there are no specific rules for the regulation of franchising. For example, in Singapore, Thailand and other countries, the emphasis is on norms of behavior, that is, on self-regulation.
Unlike America, Australia and China, the countries of Southeast Asia are not governed by special franchise laws. I advise franchisors and franchisees to consider the following factors before expanding their business in Asia, although, these tips are globally applicable to any other country:
- Domestic conditions.
(PEST analysis, which includes analyzes of political, economic, social and technological environments). For example, Afghanistan, which is known for not very favorable conditions and unsuccessful economy, would not be suitable for many brands to be located there. It is important to consider things like religion or even what kind of Internet is in the country, for example, 3G or 4G.
- The degree of state control.
It is important to understand the type of taxation in the country, the fees charged from foreign firms.
- Linguistic and ethnic characteristics of the population.
There are many examples of brands that have incorrectly translated or adapted their names to other languages, making the brand sound offensive to a particular region. There are many dialect groups in Southeast Asia, and sometimes the translation is suitable for one group, but sounds very unusual for another. Even these things need to be scrutinized. Otherwise, there is a risk of failure.
What is their purchasing power? Will they like your food? For example, if you are opening in a Muslim country where there is such a thing as halal, you need to know which ingredients can be used and which ones to restrict.
For example, in Singapore, buying or renting a premise is very expensive, so if you want to transfer a supermarket franchise from Switzerland to Singapore, it will be very difficult and most likely unprofitable, since such a franchise requires a lot of space: a department for salads, desserts, coffee, beer, seafood, meat and so on. It will be very expensive.
There are many coffee brands in many countries that look like Starbucks but are not. The same situation is with KFC and other brands. You need to make sure that your brand is not similar to the existing ones.
Which franchisees will you work with? Do they have the capital they need? Will they be loyal and honest with you? I think you've heard about cases when franchisees are silent about the fact that their brother is already working with a competitor's brand. This person can learn from you, and a year after becoming a franchisee, he will say goodbye to you, having received the necessary information, and return to his brother. In the end, a competitor's company may leave you behind.
All these factors should be considered when entering a new market.
Market adaptation is the most important of all of the above. You should not be overly stubborn and assume that everything in the franchise is inviolable and cannot be localized.
For example, McDonald's in India doesn't sell beef because most locals don't eat it. Therefore, the company had to adapt. Even the size of the dish matters. If you offer people from Southeast Asia the same portions as in America, most visitors will not be able to finish the dish, because it is too much and unusual for them. This will entail unnecessary costs for products, which in the end will be unjustified. And it is not a fact that the visitor will return.
– Vasil – what is the situation in Singapore now? Is the annual fall FLA expected there?
– Albert – Yes. We are still doing FLA, but many of our neighbors are still unable to move due to quarantine, so our current plan may change at any time, because it is not known when the next wave of COVID-19 will begin or if there will be any. While we are very lucky, fewer than 150 deaths have been identified.
Local franchisors will be able to attend, and franchisors from other countries will be invited virtually using a special portal through which they will be presented on the FLA.
Franchise expert Topfranchise.com